Tax & Finance Glossary
Every tax, finance and compliance term you need to know — explained in plain English by our Chartered Accountant team.
Advance Tax
Income tax paid in instalments during the financial year rather than as a lump sum at the end. Applicable when estimated tax liability exceeds Rs 10,000.
Learn moreAssessment Year (AY)
The year following the financial year in which income is assessed and taxed. For FY 2025-26, the AY is 2026-27.
Learn moreAudit Trail
A chronological record of system activities that provides documentary evidence of the sequence of activities. Mandatory for companies from FY 2023-24 under Companies Act.
Learn moreCapital Gains
Profit earned from the sale of a capital asset such as property, shares, or mutual funds. Classified as short-term or long-term based on holding period.
Learn moreComposition Scheme
A simplified GST scheme for small taxpayers with turnover up to Rs 1.5 crore, allowing payment of tax at a fixed rate with minimal compliance.
Learn moreDeferred Tax
A tax liability or asset arising from temporary differences between accounting profit and taxable profit. Recognised as per AS-22 or Ind AS 12.
Learn moreDigital Signature Certificate (DSC)
An electronic equivalent of a physical signature, required for e-filing of income tax returns, MCA forms, and GST registrations for companies.
Learn moreDirector Identification Number (DIN)
A unique identification number allotted to an individual who is a director or intends to become a director of a company. Required under the Companies Act.
Learn moreE-Way Bill
An electronic document required for movement of goods worth more than Rs 50,000. Generated on the GST portal before goods are transported.
Learn moreFEMA
Foreign Exchange Management Act, 1999 — governs foreign exchange transactions, external trade, and payments in India. Administered by the RBI.
Learn moreFinancial Year (FY)
The 12-month period from April 1 to March 31 used for accounting and tax purposes in India.
Learn moreForm 16
A TDS certificate issued by employers to employees, detailing salary paid and tax deducted during the financial year. Essential for ITR filing.
Learn moreGSTR-1
Monthly or quarterly GST return for reporting details of outward supplies (sales). Must be filed by the 11th of the following month.
Learn moreGSTR-3B
Monthly or quarterly summary GST return used for tax payment. Includes summary of outward and inward supplies and ITC claimed.
Learn moreHUF
Hindu Undivided Family — a separate tax entity under Indian law consisting of a common ancestor and all lineal descendants. Has its own PAN and tax benefits.
Learn moreInput Tax Credit (ITC)
Credit available to a registered GST taxpayer for the tax paid on purchases, which can be set off against GST liability on output supplies.
Learn moreInd AS
Indian Accounting Standards converged with IFRS, applicable to listed companies, large unlisted companies, and NBFCs based on net worth thresholds.
Learn moreLLP
Limited Liability Partnership — a business structure that offers limited liability protection to partners with flexibility of a partnership. Governed by the LLP Act, 2008.
Learn moreMSME
Micro, Small and Medium Enterprises — classified based on investment and turnover. MSMEs get benefits like priority sector lending, lower interest rates, and delayed payment protection.
Learn moreNRI
Non-Resident Indian — an Indian citizen or PIO who resides outside India for more than 182 days in a financial year. Has specific tax and FEMA implications.
Learn morePAN
Permanent Account Number — a 10-character alphanumeric identifier issued by the Income Tax Department. Required for all financial transactions above specified limits.
Learn morePresumptive Taxation
A simplified tax scheme under Sections 44AD, 44ADA, and 44AE where income is presumed at a fixed percentage of turnover, reducing the need for detailed books of accounts.
Learn moreReverse Charge Mechanism (RCM)
Under GST, the recipient of goods or services pays the tax instead of the supplier. Applicable for specified goods/services and imports.
Learn moreSection 80C
Income Tax deduction provision allowing deduction up to Rs 1.5 lakh for specified investments like PPF, ELSS, LIC premium, tuition fees, and home loan principal.
Learn moreTAN
Tax Deduction and Collection Account Number — a 10-digit alphanumeric number required for entities that deduct or collect tax at source.
Learn moreTDS
Tax Deducted at Source — a system where the payer deducts a specified percentage of tax before making payment. Covers salary, interest, rent, professional fees, and more.
Learn moreTransfer Pricing
Rules governing the pricing of transactions between related parties or associated enterprises to ensure arm's length pricing and prevent profit shifting.
Learn moreTurnover
The total value of sales or revenue generated by a business during a specific period. Different tax laws may define turnover differently for their purposes.
Learn moreVivad Se Vishwas
A direct tax dispute resolution scheme by the government allowing settlement of pending tax disputes by paying a specified percentage of disputed tax.
Learn moreWithholding Tax
Tax withheld by the payer on payments to non-residents under Section 195. Rate depends on the nature of payment and applicable DTAA.
Learn moreZero-Rated Supply
Under GST, supplies that are taxed at 0% rate — includes exports and supplies to SEZ. The supplier can claim refund of input tax credit on such supplies.
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